Gambling Taxation in India

Under Indian law, all gambling is subject to gaming tax. According to the rules contained in the Gambling Act, the taxable base for betting is the amount of bets paid by players.

According to the Gambling Act, in those territories where offline casinos are legalized, the gambling taxpayer organizes the gambling, acting based on appropriate permits or concessions. In the case of play casino online, the tax liability arises already at the moment when the organization starts its activities related to the organization of online casino games, regardless of whether it is a fixed location or via the Internet. It means that it is the bookmaker who has to pay the tax.

The tax rate depends directly on the type of game, regardless of its sale. Thus, in the case of lotteries, the tax rate is 10%; in the case of money lotteries, it is already 15%, and in circulation games, it is 20%. The highest rate is provided for poker, played according to the tournament formula, and is 50%. In the case of betting, the amount of tax is 12%. Regardless of the player’s wager amount, the wager amount is reduced by 12%. It means that it is the player’s responsibility to pay the tax.

Winnings not exceeding a set amount are not taxable, with the caveat that this applies only to online casino games organized by authorized organizations. If winnings exceed the established threshold, a flat tax of 10% of the amount won in cash or kind is imposed. Again, the casino is responsible for collecting and paying the tax.

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India’s gambling industry is increasing. In 2016, the country’s online gambling market was worth $290 million and was expected to reach the $1 billion mark by 2021, with a user base exceeding 628 million players.

Key drivers of market growth

  • India is a young country, with about half the population under 25 years old.
  • Availability of smartphones at low cost. Smartphone users are expected to increase from 468 million in 2017 to 859 million in 2022, rising 84 percent.
  • India is second only to China in the number of Internet users. The number of active Internet users is expected to rise sharply from 451 million in 2019 to 829 million users by 2021.
  • Games and in-game content become famous if localized for the Indian market.
  • A strong and thriving information technology sector. The number of online game developers has grown from just 25 in 2010 to 275 in 2019. Thanks to a growing number of talented programmers, India is becoming a famous center for developing backend systems for game companies.

What is gambling?

It matters to the IRS how your winnings are classified because that determines whether you have to pay tax on them. If you win gambling, you’re usually exempt from tax. The tax authorities define gambling as a game in which luck or chance is the only factor, i.e., no skill or strategic ability contributed to the decisive outcome.

Suppose a connection can be made to your professional activities, such as receiving a prize for your work in an art or science competition. In that case, the award can be attributed to this type of income.

EU licenses

As in most other countries, in India, under the State Gaming Compact, the state has a monopoly on issuing licenses. However, since the state virtually does not issue licenses, providers acquire them from another country, mainly Malta, where a more open policy for the industry prevails. According to competition rules, this is acceptable. But beware if a casino does not have an EU license!

Lotto

The lottery game is a classic gambling online casino game because it is the only chance that decides. Therefore, the IRS cannot classify this income as any taxable income. So if you win the lottery or at the races and sports betting, you keep everything.

Poker

In the case of poker, the situation is not entirely clear-cut, as poker is not considered a game of chance purely. Instead, it is a mixture of gambling and a game of skill. However, the Federal Fiscal Court also disagreed for a long time and in 2015 announced its decision, “Winnings from participating in poker tournaments may be subject to income tax.”

However, if you’re a gambling enthusiast and just got lucky once, winnings probably won’t count as income. However, it would be best if you didn’t play poker for the long, blog about it, or even hold poker events in public because then you’ll quickly become considered a pro.

Winning from loto shows

In the case of winnings from a television show, the point is more straightforward. They often have to be taxed as “other income. The Tax Court gives the following rationale: participation in a TV show is a contractually agreed upon service, and the prize received is considered remuneration for the service rendered. According to the tax authorities, the following paragraphs speak to the existence of a work-performance relationship and, therefore, taxable income.

Even if your winnings are not initially taxable, taxes usually appear once you invest or invest your money and thus make further profits. Examples of this are:

  • Interest earned as a result of investing in an account. It is taxed as capital gains.
  • If profits are invested in real estate and rental income, Rental income is earned.
  • Capital gains from buying and selling cryptocurrencies.

Online casinos

The same goes for casino winnings, whether online or offline: at first, winnings are not taxed because it’s a matter of chance and pure luck. Then, however, if you win more often so that your earnings can be treated as a kind of regular income, the tax office may levy income tax on it.

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Contests and prize draws

Contests with prizes and prize draws are permitted if answering a question or sending a participation card is sufficient to maintain the chances of winning – i.e., and they are not gambling with payment.

However, if the organizer requires the purchase of goods and charges a higher price than usual for them, or if participation in the game takes place through a premium rate telephone number (i.e., participation in the game is no longer accessible for the organizer), the conduct of such a game requires a license under the Gambling Act.